August NonManufacturing Activity, Private Sector Jobs, Layoffs and Weekly Jobless Claims

KEY DATA: ISM (NonManufacturing): +2.8 points; Orders: +3.4 points/ ADP: 163,000/ Layoffs: 38,472/ Claims: -10,000

IN A NUTSHELL: “Economic momentum remains strong, even if third quarter growth may be somewhat less robust than in the spring.”

WHAT IT MEANS: “When supply managers talk, economists listen”. No, purchasing professionals are not EF Hutton, but they are at the forefront of the economy. Well, this week they opened up and it looks like business conditions are really good. On Tuesday, the Institute for Supply Management reported that manufacturing activity rose solidly in August, led by surging orders. Today, they released their non-manufacturing numbers and they show that the service sector is booming as well. New order rose sharply, causing employment to rise. Despite a sharp rise in activity, deliveries slowed and order books swelled, indicating that this sector should continue to expand solidly for months to come.

Tomorrow is Employment Friday (my name) and prior to that release we get the ADP estimate of private sector job gains. The employment services firm number came in lower than expected. There was a robust job increase in manufacturing but a moderate increase in the services component. While mid-sized firms added workers like crazy, large and small firms hired more cautiously. It looks like there was a good summer tourism season as leisure and hospitality payrolls surged. Keep in mind, this report tends to do a good job of following the government numbers over time, but in any given month it can be off significantly. ADP’s estimates of private sector job gains over the last six months averaged 187,000. This seems more reasonable than the roughly 230,000 that we will likely average once the August numbers are released.

Challenger, Gray and Christmas found that layoffs were up in August, when compared to both this July or August 2017. This was the third month this year that layoffs were higher than the year before, which is quite odd given how strong the job market has been. Keep in mind, these are announcements, not actual cuts and they don’t indicate where in the world the downsizing will occur.

Jobless claims fell to the lowest level since November 1969. When you adjust for the size of the labor force, it is the lowest on record. It is hard to believe how few people are being cut given these data include not just typical layoffs but also business closings and downsizings. It is clear the last thing firms want to do is let people go and that is the clearest sign that the labor market is drum-tight.

MARKETS AND FED POLICY IMPLICATIONS: The data are clear: This economy is soaring. Yes, the widening trade deficit and weakening vehicle sales point to more moderate headline third quarter GDP growth. But when it comes to the business sector, there seems to be little or no marked slowdown at all. The issue is not where we are now, but how do we sustain the current growth pace through next year. That will depend upon better consumer spending, which means wage increases will have to accelerate, and stronger business capital spending, which means some of the money will actually have to start buying machinery, equipment and structures. That could happen, but as the saying goes, “we shall see”. I expect the August job gain will be in the 185,000-range. Firms are finding people to hire and holding onto employees, but payroll increases above 200,000 is not likely sustainable.

July Trade Deficit and August Help Wanted OnLine

KEY DATA: Deficit: $50.1 bil. ($4.3 bil. wider); Exports: -1%; Imports: +0.9%/ HWOL: -46,300

IN A NUTSHELL: “The widening trade deficit will restrain growth in the third quarter.”

WHAT IT MEANS: We shall see if all the machinations going on over tariffs and trade deals ultimately lead to a narrowing of the trade deficit, but for now, the shortfall seems to be rebounding after an initial decline. The July trade deficit surged, which was expected, though the widening was larger than expected. A decline in imports was not a surprise as the rush to export soybeans led to a temporary jump in agricultural shipments. That unwound in July. However, exports of aircraft and consumer goods also declined. Overseas sales of vehicles and industrial products were up. On the import side, demand for just about everything except pharmaceutical products increased. Energy was not a major factor in the results.

Online want ads faded a touch in August. The Conference Board’s measure was down and a chart of the last year looks like a very scary roller coaster. But it starts and ends at roughly the same point, so it looks like the level is stuck in a range. Unfortunately, that range is well below the highs put in at the end of 2015. What does that mean for job growth? Probably little as it is doubtful that firms have cut back because they are looking for fewer workers. More likely, there is recognition that they can fill only so many open positions at a time, so the decline in ads probably reflects the supply of workers not the demand for workers.  

MARKETS AND FED POLICY IMPLICATIONS: The large widening of the trade deficit in July is likely to be sustained and trade will probably restrain growth this quarter. This is important because the narrowing in the trade deficit added 1.2 percentage points to growth in the second quarter. My best guess as of now is that trade may reduce third quarter growth by between one-quarter and one-half a percentage point. That is a swing of roughly 1.5 percentage points, meaning if everything else stays the same, GDP growth would be in the 2.5% to 2.75% range. But everything is not equal. Vehicle sales were soft again in August. Vehicles boosted growth in the second quarter. A decline in the third quarter would restrain overall growth by about 0.25 percentage point compared to the second quarter. To get to three percent, we need stronger government spending and much faster business investment. That is why I have been warning that third quarter growth could come in lower than many expect. While investors should take heed, Friday we get the August jobs report. I suspect that will be the focus of attention, at least when it comes to hard economic data. The consensus is for a rebound from the more moderate July number but still below the roughly 215,000 monthly average seen so far this year. But it is the wage number that is really important, as wage gains remain limited. It could run hot, which would be just another reason for the Fed to hike rates.

July Income and Spending and Weekly Jobless Claims

KEY DATA: Consumption: +0.4%; Income: +0.3%; Prices: +0.1%; Ex-Food and Energy: +0.2%/ Claims: +3,000

IN A NUTSHELL: “Continued spending should keep growth at a solid pace.”

WHAT IT MEANS: Third quarter growth looks like it will be solid, but how strong is a different question. We got a hint as consumer spending held up solidly in July. Most of that came from growing demand for services. It is unclear from the report precisely what was bought, but given that July’s temperatures were well above average (according to NOAA) much of the spending may have been on utilities. Softening of vehicle sales led to a decline in big-ticket item purchases. On the income side, wage and salary gains remain solid but the rise over the year continues to decelerate. Inflation-adjusted wage increase was the smallest in eighteen months. In other words, purchasing power of workers is improving, but at a declining pace, which raises questions about the sustainability of strong spending. The savings rate declined a little more than expected. Households may be maintaining their spending levels by pulling from savings. As for inflation, it increased moderately, excluding food and energy, and was at the Fed’s 2% target.

Jobless claims rose modestly last week and remain around historic lows when adjusted for labor force size. So, I will repeat what has been said for this entire year and most of last year: The labor market is incredibly tight, despite what the limited wage increases imply.

MARKETS AND FED POLICY IMPLICATIONS: July was hot and if this past week is any indicator, August may have been hotter. Households are probably burning through their utility budgets to keep cool. While that is likely to mean the August spending number will be good, it is the rest of the consumption gains that will determine the real meaning of the data. Right now, it looks like third quarter consumer spending will be solid but significantly slower than the robust rise posted in the second quarter. It is likely the trade deficit will widen given the wild swings in things such as soy exports. It will take a huge increase in business investment to get growth anywhere near the 4.2% second quarter number. Going forward, the impact of the tax cuts on household spending growth will wear off. I doubt that investors will look that far into the future. Earnings are strong and pricing power is growing. If that power is used, inflation will accelerate. But until we actually see that happen, few will likely worry. The few who will be concerned make up the Federal Reserve. The next FOMC meeting is September 25-26. I still expect a rate hike at that meeting and another one in December.

August Consumer Confidence and June Housing Prices

KEY DATA: Confidence: +5.5 points; Expectations: +5.2 points/ Home Prices: +0.3%; Over-Year: +6.2%

IN A NUTSHELL: “Consumers remain exuberant and that bodes well for continued solid spending in the months to come.”

WHAT IT MEANS: Maybe the 4% growth we saw in the second quarter will not be sustained, but that doesn’t mean growth will falter significantly in the near future. The Conference Board reported that its consumer confidence index rose in August to the highest level in nearly eighteen years. The details of the report were generally upbeat. A rising proportion of the respondents think business conditions are good and that it is getting easier to find a job. Actually, it is hard to understand why over twelve percent of the respondents still think jobs are hard to get, but that is a different story. The strong job market, coupled with improving expectations about the ability to find a job fed through into increased belief that income will rise. Still, just over twenty-five percent think they will see their incomes increase in the next six months, which is somewhat disconcerting. It shows that workers may think labor market conditions are strong but they still don’t expect to benefit from that situation. Unfortunately, if workers think their incomes will remain stagnant, they don’t tend to spend more.

With housing sales ebbing, it should not be surprising that the surge in prices is fading as well. The S&P CoreLogic Case-Shiller national home price index rose modestly in June. Over the year, prices are still going up solidly, but it looks like the rate of gain may have peaked. As for metro areas, I guess gambling on housing remains fun as the fastest increase in prices over the year was in Las Vegas. Seattle and San Francisco are not that far behind, but the rise in costs in those two areas seems to moderating.

MARKETS AND FED POLICY IMPLICATIONS: As long as consumers are confident, and they really are right now, they will continue to spend money. So there is little reason to expect that the economy will falter the rest of the year. Something significant would have to happen to put the brakes on growth. But the question remains as to whether strong growth can be sustained. Workers are just not seeing wages rise and now there seems to be a growing trend toward promoting people without any salary bump. Boy, that sounds like a strange way to reward people. Congratulations, you did a great job, you now have more responsibility but your pay is the same. And businesspeople, economists and Fed members wonder why productivity is going nowhere. Do they really think that making people work more for the same pay creates an incentive to work harder? There was always a feedback between wages and productivity. If you worked harder and produced more, your pay increased. So why work harder if you don’t get paid more. Maybe I’m naïve, but I don’t think workers are dumb and are falling for the promotion trick. I think they just start looking for a way out. In any event, the high levels of confidence will likely be read as a positive for the economy. But the fact that relatively few workers think their pay will rise is something that should not be dismissed. It puts a damper on the willingness to spend.  

July Durable Goods Orders and Fed Chair Powell’s Comments

KEY DATA: Orders: -1.7%; Excluding Aircraft: +1.3%; Capital Spending: +1.4%

IN A NUTSHELL: “The Fed Chair expects more rate hikes because of the strong economy and strong business investment supports that view.”

WHAT IT MEANS: The tax cut provided created huge increases in profits and it looks likes firms are starting to spend their earnings on capital goods. Durable goods orders seemingly cratered in July but forget the headline number: The drop was due to large declines in both private and defense aircraft orders, which bounce around like super balls. Excluding aircraft, demand for big ticket items surged, led by sharp increases in machinery, computers and vehicles. The gains, though, were not universal. Demand for communications and electrical equipment was off. Still, private sector capital spending jumped and is up over 7% since July 2017. That indicates firms are finally using at least some of their newfound largesse to bolster production and productivity. That bodes well for continued solid growth this year.

The annual Jackson Hole Fed conference is underway and Fed Chair Powell talked today. It is easiest to summarize his views on future rate hikes by presenting his own words: “… if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate. … The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one. My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.” In other words, it will take a clear and significant slowdown to cause the Fed to slow or stop the rate hikes.

MARKETS AND FED POLICY IMPLICATIONS: With businesses finally starting to invest heavily, the second leg of the tax cut-induced strong growth is taking place. The expansion is likely to moderate as consumer spending settles down, but it should still be quite solid. That is why most economists, including myself, have said we still have one year – or more – of really good growth before the sugar high wears off. If that is the case, then there is no reason for the Fed to stop normalizing rates and shrinking its balance sheet. Next summer, conditions might be different and a slowdown in the process might be possible. Thus, it is likely that a minimum of four more rate hikes will occur over the next year. And if growth does not decelerate significantly, if inflation creeps upward and stays above the Fed’s target, then additional rate hikes should be expected. What that does to investors’ thinking is anyone’s guess. But they might want to focus on something the Fed Chair said: “I would also note briefly that the U.S. economy faces a number of longer-term structural challenges that are mostly beyond the reach of monetary policy. For example, real wages, particularly for medium- and low-income workers, have grown quite slowly in recent decades. Economic mobility in the United States has declined and is now lower than in most other advanced economies. Addressing the federal budget deficit, which has long been on an unsustainable path, becomes increasingly important as a larger share of the population retires.”  

July Existing Home Sales

KEY DATA: Sales: -0.7%; 1-Family: -0.2%; Condos: -4.8%; Prices: +4.5%; 1-Family: 4.6%; Condos: 3.2%

IN A NUTSHELL: “The slowdown in the housing market continues.”

WHAT IT MEANS: The housing market has hit a rough spot. Existing home sales fell in July, the fourth consecutive month that demand was off. The level of home purchases was the lowest in over two years. Condo sales, which had been holding up, joined single-family units in the downward trend. Looking across the country, sales rose nicely in the West but were off sharply in the Northeast and declined modestly in the South and Midwest. As for prices, the rise is also trending downward. Condo price gains are modest, but the single-family price increase was not a whole lot faster. The deceleration in prices is occurring as inventory is finally expanding, even if it edged down a touch in July. Unfortunately, supply is still quite low on an historical basis.

MARKETS AND FED POLICY IMPLICATIONS: Rising prices and increasing mortgage rates, coupled with limited supply, are reducing affordability and slowing home sales. It is hard to believe those limiting factors will change anytime soon. Tomorrow we get new home sales and they were weak in June. Another decline would add to the belief that the housing sector may restrain growth not only in the third quarter but going forward. The markets are setting records as business fundamentals are strong, but investors need to start looking outward. Right now, job gains are solid but income increases are limited and that does not bode well for sustained strong consumer spending growth. There is uncertainty about the impacts of tariffs and how long they will last. Businesses continue to spend most of their tax gains on stock buybacks, dividends and mergers and acquisitions, rather than buildings, machinery, equipment or software. That raises questions about improved productivity. So, the beat goes on in the markets and while the economic fundamentals are solid, it would be nice if we start seeing better wage growth and more money piling into capital spending. The Fed, meanwhile, has to deal with the economic strength and the political pressures coming from presidential tweets. In order to maintain credibility, additional rate hikes and balance sheet reductions are likely.

July Retail Sales, Industrial Production, Second Quarter Productivity and August Home Builders Index

KEY DATA: Sales: +0.5%; Excluding Vehicles: +0.6%/ IP: +0.1%; Manufacturing: +0.3%/ Productivity: +2.9%; Labor Costs: -0.9%/ NAHB: -1 point

IN A NUTSHELL: “The solid manufacturing sector and continued consumer spending hold out hope that third quarter growth will be good, though maybe not great.”

WHAT IT MEANS: Factors that drive and restrain growth are creating major uncertainties about the economy and even the data are unclear. Consider retail sales, which rose solidly in July. But that came after a sharp downward revision to the June numbers. That raises the possibility second quarter growth could be revised downward as well. The biggest increases were for food, both at home and at restaurants, gasoline and in department stores. Prices are rising in most of those categories. As for department stores, are sales really surging? There were strong online sales, which was not surprising given Amazon’s increase at its Prime Day sale. This was a good report, but it isn’t adjusted for inflation, so it is not clear just how fast consumer spending is growing, especially since vehicle sales were down in July.

One area which continues to do well is manufacturing. Output rose moderately in July after a robust production spurt in June. Rising vehicle assembly rates helped, but given the fall off in demand, that may turn around quickly. Still, most manufacturing sectors posted production gains, so this sector remains solid. Slowdowns in the mining and utility sectors reduced overall output gains.

With growth booming in the second quarter, it should not have been a surprise that productivity jumped by the fastest pace in over three years. Manufacturing productivity gains remain somewhat sluggish. While production surged, hourly compensation lagged well behind and that led to a sharp decline in labor costs. At least in part, the strong profit gains reflected those cost controls. Unless more of those profits find their way into compensation, the solid retail sales numbers may not be sustainable.

Homebuilders are not a happy bunch these days. Interest rates and input costs are rising while demand is moderating. Thus, the decline in the National Home Builders Associations index was expected. The level is the lowest in a year and is a warning that this component of the economy may continue to restrain growth.

MARKETS AND FED POLICY IMPLICATIONS: The problems in Turkey are the focus of attention right now and rightfully so. We just don’t know how long the crisis will go and what kind of contagion effect will be created. This uncertainty is causing some rush to safety. Meanwhile, back in the United States, the economy may be moderating, but not faltering. Still, the president’s economists at the Office of Management and Budget just downgraded growth for this year and Congress’s economists at the Congressional Budget Office recently projected a sharp moderation in growth next year and a further slowdown in 2020. The CBO’s forecast is very much in line with most private sector forecasts. At the same time, most inflation forecasts are for the rate to exceed the Fed’s target of 2% for a number of years, though not significantly. But it takes the slowing growth to keep inflation from getting even hotter. The Fed continues to face an economy that has strong growth, rising prices but economic uncertainties, especially when the trade situation is factored in. Unless Turkey unexpectedly creates major economic and financial problems, there will be time to slow rate hikes down next year, so two more rate hikes remain the likely course of action.

July Import and Export Prices and Small Business Confidence

KEY DATA: Imports: 0%; Nonfuel: -0.3%; Exports: -0.5%; Farm: -5.3%/ NFIB: +0.7 point

IN A NUTSHELL: “The strong dollar is helping keep import costs down, though it improves the competitiveness of foreign companies.”

WHAT IT MEANS: The dollar has been rising sharply, increasing about eight percent since its bottom early in the year. That is now showing up in softer import prices, which were flat in July despite a rebound in energy costs. Imported food prices were down solidly, as were capital goods and vehicle prices. Consumer durable good costs were up, possibly because of sharp increases in the prices of goods from Canada and Asia that have been subjected to tariffs. We can also see the impact of the trade skirmishes on export prices. Agricultural products suffered a huge drop in prices, as they are the targets of foreign tariffs and are starting to lose markets.

While the trade war may be battering some industries, small businesses seem to be as happy as they have ever been. The National Federation of Independent Business’s Index jumped in July to its second highest level on record. The record was set in July 1983, thirty-five years ago, which says a lot. Small business owners are hiring and looking for more workers, though the inability to find qualified workers remains a major problem. The confidence of small business owners can also be seen in the rise in the plans for capital spending.

MARKETS AND FED POLICY IMPLICATIONS: The economic expansion has reached into the small business sector, which now may be the most optimistic of any group. That is a positive indicator of near-term growth, as these firms don’t tend to make multi-year decisions. The strong hiring expectations should form a base for job gains. But these firms are starting to be pressured by the lack of workers and their compensation costs are rising. That may be good for their workers but not necessarily for their bottom lines and that could limit hiring. It is hard to pay a current workers less than a new worker, so pay increases reverberate through the small business quickly and extensively. Still, the small business optimism is good to see. On the other hand, the impacts of the trade skirmishes are not good to see. Tariffs may have been put on some products but a decline in the value of the dollar affects all imports, making all foreign firms in all industries more competitive. Also, the tariffs are essentially a sales tax that U.S. consumers have to pay. That is true not just for products imported into the U.S. Some of our exports, such as farm products, that go to other countries, face tariffs there. When they are turned into finished goods and sent back to the U.S., they face tariffs a second time. Who pays those costs? Consumers. So look for retail inflation to start accelerating as we move through the year. For now, though, the soft import price index provides some respite for the markets as investors didn’t see a surge in import prices that would spook bondholders or the Fed.

July Consumer Prices and Inflation-Adjusted Wages

KEY DATA: CPI: +0.2%; Over-Year: +2.9%; Less Food and Energy: +0.2%; Over-Year: 2.4%/ Real Hourly Wages (Over-Year): -0.2%; Real Weekly Earnings (Over-Year): +0.1%

IN A NUTSHELL: “Consumer inflation is accelerating faster than wages, limiting household spending power.”

WHAT IT MEANS: With trade issues swirling, Turkey’s currency collapsing and uncertainty about the state of the world economy rising, it would be nice to see some comforting U.S. economic numbers. I am not sure we got that today. The Consumer Price Index rose moderately in July, but it wasn’t the monthly change that really made people take notice, it was the year-over-year gain that is of concern. The rise from July 2017 was the largest since July 2011, right after the surge in energy costs. Energy has rebounded recently as well, but not nearly as much as it did earlier in the decade. Excluding food and energy, the so-called core index, prices were up the fastest in a decade. So, it is hard to say that inflation is now tame.

As usual, the details of the report contained some oddities. Energy prices fell, but oil costs jumped. Gasoline price declines kept the gains down. Transportation prices jumped and shelter costs continue to rise sharply. The surge in home prices is leading the way. In addition, vehicle prices, which had been restraining consumer costs, are now driving them up. On the other hand, there was a large decline in drug costs. Really? I wonder what kind of medicinal drugs they are smoking in Washington (hehe). It looks like restaurants are pushing up prices more slowly than they had been.

With inflation approaching the magic 3% (not that it means a whole lot), consumers are becoming pressured to continue buying more goods. Real (inflation-adjusted) wages went nowhere in July and over-the-year, they were down. That is, household purchasing power is declining. Even when you add in rising hours worked, income was up minimally since July 2017.  

MARKETS AND FED POLICY IMPLICATIONS: The economy boomed in the spring, fed by rising after-tax income for both businesses and households. And that sugar high should continue for a while. But stronger demand is causing consumer prices to rise faster. While the Consumer Price Index is not the best measure of inflation (the Fed prefers the PCE, the Personal Consumption Expenditure deflator), it is one way of looking at costs. What is worrisome is that the potential inflationary impacts from the tariffs have not had a chance to move through the system. The combination of strong consumer demand, tight labor markets and tariff-induced cost increases points to even higher inflation over the second half of the year. The next reading of the PCE comes out on August 30th. If that index shows faster inflation as well, which I expect, it could lock in not just a rate hike in September but also one in December. As for investors, inflation is just one concern they are trying to deal with. Turkey’s currency implosion and its potential impact on European banks is another. And there continues to be a slow but steady ramping up of the trade skirmishes, especially with China. So the best thing to say is that uncertainty is likely to reign for quite some time and that means we are in for some bumpy days ahead.

July Employment Situation and NonManufacturing Activity and June Trade Deficit

KEY DATA: Payrolls: +157,000, Private: 170,000; Revisions: +59,000; Unemployment Rate: 3.9% (down from 4.0%; wages: +0.3%/ ISM (NonMan.): -3.4 points; Orders: -6.2 points/ Trade Deficit: $46.3 billion (7.3% wider)

IN A NUTSHELL: “Despite a disappointing jobs number, the labor market remains strong.”

WHAT IT MEANS: It was a big day for data and the numbers were mixed. The July jobs gain was well below expectations but as I always say, don’t assume one employment report is a good indicator of anything. First, the previous two months job increases were revised upward sharply. Taken together, job growth was actually strong. Indeed, the three-month average, which is a better way of looking at the situation, was a robust 224,000. In addition, Toys-R-Us’ closing reduced retail jobs sharply. So, don’t even look at the headline number, especially since the details were really good. Manufacturers and restaurants keep adding workers like crazy and construction and health care are hiring strongly. Government was down, but that was in education, which the government just cannot figure out how to seasonally adjust. On the unemployment side, the rate fell and is likely to continue declining. The labor force grew and the participation rate was stable. The one disturbing number was the wage increase. It was decent, but over the year, the 2.7% gain means that real wages are up less than 1% over the year. That is pathetic.  

NonManufacturing activity slipped pretty sharply in July. The Institute for Supply Management’s index dropped led by major decline in new orders. Backlogs grew a lot less rapidly, which is a concern. Business activity was off significantly and that is something the needs to be watched as it may be the first sign that the bloom is coming off the economy.

The trade deficit widened sharply in June as exports declined while imports rose. The drop in foreign sales was not surprising, given the trade war issues, but not in the categories we saw. Agricultural exports rose but there were sharp declines in capital goods, vehicles and consumer products. That does not bode well for future exports. We also exported more petroleum products. On the import side, we bought a lot more consumer goods, petroleum products and vehicles, but a lot less capital goods.

MARKETS AND FED POLICY IMPLICATIONS: The economy is in very good shape and the labor market is mirroring the gains. The July payroll increase is likely to be revised upward, if the previous months upward revisions are any indicator, and Toys-R-Us is not shutting down again. But wages are just not rising fast enough to improve spending power. The soft July vehicle sales number may be a trend as consumers are becoming tapped out. That does not bode well for future spending. In addition, we may be starting to see that trade wars can create significant negatives for economies. The decline in exports must be watched carefully. And while the Supply Managers’ index drop was just one number, if it is the start of a trend, it could be worrisome. The Fed will not be swayed by the headline jobs number but instead will look at the details. The lack of significant wage pressure is helpful, at least on the inflation front, but the trend in job growth is still above labor force growth and that implies a further tightening in the labor markets. The weak consumer spending power growth and the first crack in the economy that could be indicated by the slowdown in the nonmanufacturing segment may not change policy in the short run. But they are now likely on the Fed members’ radar.

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